The drop in gross domestic product was driven by a plunge in military spending, as well as fewer exports and a steep slowdown in the buildup of inventories by businesses. ...That is similar to my post this morning: Comments on Q4 GDP and Investment
Despite the overall contraction, there was underlying data in the report suggesting the economy is not on the brink of a recession or an extended slump. Residential investment jumped 15.3 percent, a sign that the housing sector continues to recover, for one. Similarly, investment in equipment and software by businesses rose 12.4 percent, an indicator that companies are still spending.
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The 22.2 percent drop in military spending – the sharpest quarterly drop in more than four decades – along with the drop in inventories and exports overwhelmed more positive indicators in the private sector, [Michael Feroli, chief United States economist at JPMorgan] said.
Thursday economic releases:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 350 thousand from 330 thousand last week.
• Also at 8:30 AM, Personal Income and Outlays for December. The consensus is for a 0.7% increase in personal income in December, and for 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%. Personal income was boosted by some high income earners accelerating income to avoid higher taxes in 2013.
• At 9:45 AM, the Chicago Purchasing Managers Index for January will be released. The consensus is for a decrease to 50.5, down from 51.6 in December.
Is it possible that investment spending by businesses on capital goods was the result of an expiring tax credit, hence those sales were just pulled forward and not necessarily a sign of an upward trend? We have been fooled before by this phenomena. Thanks.
ReplyDeleteIs it possible the Fed created a 2nd mini bubble in RE due to this low interest rate environment leaving little option for returns except to drive investors to speculate in "investment" properties and rentals to make some kind of ROI? Anyone notice that a 1/3 of RE sales today are to "investors"? Anyone notice Blackrock loading up?
ReplyDeleteI just found that "section 179 expensing" was renewed but it was not a slam dunk that it would. Seems possible businesses pulled the trigger on purchases in anticipation that it might not have. It's a theory, anyway.
ReplyDelete